Spring Surge in New-Home Sales

DAILY REAL ESTATE NEWS | WEDNESDAY, MAY 27, 2015

New-home sales climbed 6.8 percent in April reaching a seasonally adjusted annual rate of 517,000, as home prices also saw a big jump too, the Commerce Department reported Tuesday.

The New-Home Recovery

Builders Pick Up Pace to Meet Rising Demand

New Homes Are Getting Bigger Again

"Sales are moving forward and our builder members are telling us they are starting to see more activity as more buyers get off the fence and enter the marketplace," says Tom Woods, chairman of the National Association of Home Builders.

Inventories of new homes for sale also saw a slight increase in April to 205,000 units. This now represents a 4.8-month supply at the current sales pace – still, most economists consider a 6 month supply healthy for the sector.

NAR existing-home sales report: Home Sales Cooled Off This Spring

With tight supplies, the median price for a new home soared 8.3 percent in April compared to a year ago, now at $297,300.

“While higher home prices could reduce affordability, they boost household equity, which could boost consumer spending,” Reuters reports.

Across the country, new-home sales rose by the highest percentage in the Midwest, increasing nearly 37 percent in April month-over-month and reaching a seven-month high. New-home sales also rose nearly 6 percent in the South. However, new-home sales were down in the Northeast, falling 5.6 percent month-over-month, and falling by 2.3 percent in the West.

Source: National Association of Home Builders and “New Home Sales, Prices Rise Strongly in April,” Reuters (May 26, 2015)

Multifamily Boom Can't Last Forever

DAILY REAL ESTATE NEWS | FRIDAY, MAY 15, 2015

Investors should be wary about unbridled optimism regarding the apartment market, explained two prominent housing economists at an economic trends forum on commercial real estate at the 2015 REALTORS® Legislative Meetings & Trade Expo.

Sam Chandan—author, professor, and founder of Chandan Economics—said that, just in the way that investors were fooled into thinking that the housing market couldn’t fail in the run-up to the most recent recession, so too should today’s investors avoid the temptation to believe wholesale the glowing reports about rising rents and low vacancy levels in multifamily buildings.

“Investors will tell you we’re fundamentally a nation of renters now… that narrative ignores that there’s a cyclical component,” Chandan said. “As house prices begin to improve… there will be a significant subset of renters in the U.S. who will say now is the right time to be a homeowner.”

Chandan said part of the problem is thanks to the media, which is more apt to write about billion-dollar apartment acquisitions, making it easier for readers to see the multifamily market as ever expanding in terms of record-setting deals. He also noted that the belief is enticing due to the dominant—but misleading—narrative about the largest generational segment of the population. 

“Millennials will always be millennials. They will not always be in their 20s,” Chandan said. “You can ask any 22-year-old throughout modern history, ‘Do you want to own a minivan?’ And they will say no. But one day they will.”

At the same forum, National Association of REALTORS® Chief Economist Lawrence Yun addressed the issue by looking at the data. He said that under normal circumstances population growth tracks very closely with household formation, but currently the latter is lagging behind the former. He said that situation should be good news for all housing segments.

“There is a pent-up demand for household formation which can support home sales as well as an increase in the rental rate,” Yun said, noting that the supply in multifamily new construction is still insufficient to meet market needs. “If you are an apartment owner and you are concerned that people will start buying homes, you don’t need to worry too much.”

Yun noted that a growing employment rate might do the same thing for the office market, which is still well behind multifamily in terms of recovery: “They have squeezed the workers so much into these spaces… which means vacancy rates will likely decrease.”

Ultimately, Yun advised investors not to pull back, but to proceed with caution. “We do anticipate some growth activity,” he said. “You may need to be more selective, discriminating.”

Chandan agreed: “It’s not just the ability to find good deals. It’s about having the discipline to be able to walk away from deals when they don’t make sense.”

—Meg White, REALTOR® Magazine

Mortgage Rates Take a Slight Dip This Week

DAILY REAL ESTATE NEWS | FRIDAY, MAY 22, 2015

Average fixed-rate mortgages moved slightly lower this week, a welcome reversal following three consecutive weeks of increases.

Freddie Mac reports the following national averages with mortgage rates for the week ending May 21:

• 30-year fixed-rate mortgages: averaged 3.84 percent, with an average 0.7 point, dropping from last week's 3.85 percent average. Last year at this time, 30-year rates averaged 4.14 percent.
• 15-year fixed-rate mortgages: averaged 3.05 percent, with an average 0.6 point, dropping from last week's 3.07 percent average. A year ago, 15-year rates averaged 3.25 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 2.88 percent, with an average 0.5 point, dropping from last week's 2.89 percent average. Last year at this time, 5-year ARMs averaged 2.96 percent.
• 1-year ARMs: averaged 2.51 percent, with an average 0.4 point, rising from last week's 2.48 percent average. A year ago, 1-year ARMs averaged 2.43 percent.

Source: Freddie Mac

Buyers Growing Wary From Rate Rises?

DAILY REAL ESTATE NEWS | WEDNESDAY, MAY 20, 2015

Total mortgage applications, including both refinancing and home-purchase loans, dipped 1.5 percent last week from the week prior on a seasonally adjusted basis as mortgage rates continued to tick up, the Mortgage Bankers Association reports in its weekly mortgage market survey.

Applications for home purchases, viewed as a gauge of future homebuying activity, dropped 4 percent from the previous week to its lowest level since April. Yet, home purchase applications are still 11 percent higher than the same week one year ago.

"The drop this week may indicate borrowers being wary of the recent runup in mortgage rates," said Mike Fratantoni, MBA's chief economist.

MBA reports that the 30-year fixed-rate mortgage averaged 4.04 percent last week, its highest level since December 2014 and up from 4 percent the week prior.

"We're likely to continue to see these mortgage rate swings as market participants try to anticipate Fed timing around rising short-term interest rates," says Len Kiefer, deputy chief economist at Freddie Mac. "Unfortunately, prospective home buyers may experience bouts of affordability shock in many housing markets. So far, it's been low mortgage rates that have helped to keep home-buyer affordability strong in the face of rising house prices, while income growth remains stagnant."

Mortgage applications for refinancings have been gradually falling over the past few weeks as rates have risen. Last week, applications for home refinances stayed basically flat, up just 0.3 percent for the week.

Source: “Weekly Mortgage Applications Drop 1.5% as Rates Rise,” CNBC (May 20, 2015)

It's Becoming Easier to Get a Mortgage

DAILY REAL ESTATE NEWS | TUESDAY, MAY 19, 2015

Lenders are showing signs of loosening up when it comes to home buyers seeking a mortgage. The Mortgage Bankers Association's Mortgage Credit Availability Index ticked up slight in April, following an increase the previous month too. Increases in the index are indicative of an overall loosening of credit.

Opening the Credit Box

3% Down Payments May Be Game Changer

Smaller Down Payments Lure More Buyers

FHA Lowers Its Mortgage Costs

MBA's index shows that mortgage credit availability has increased consistently over the last several months, coinciding with recent announcements from the federal government of programs that have been designed to open the credit box. Fannie Mae and Freddie Mac's move to back 3 percent down payment loans as well as the Federal Housing Administration’s action to reduce its mortgage insurance premiums have helped ease credit, MBA Chief Mike Fratantoni says.

Other government offerings also helped to ease credit even more in the latest report, reflecting April data, MBA notes.

"Mortgage credit availability increased on net in April," Fratantoni says. "The increase was driven by new offerings of FHA's 203K home improvement program, new VA offerings, and new jumbo products. The increase was partially offset by some investors tightening underwriting criteria on conventional cash out offerings."

REALTORS® surveyed have pinpointed tight credit conditions, significant lender overlays, and loan processing delay as a major hurdle facing their buyers the past few years, but REALTORS® are also reporting gradual improvements, according to the latest REALTORS® Confidence Index, a survey of real estate professionals.

REALTORS® point to the trend of lenders showing more willingness to accept slightly lower FICO scores – moving from the high range of 740-plus to now the mid-range of 620-740. Also, REALTORS® note an increase in the number of their clients securing a loan while making zero to 6 percent down payments. FHA's reduction in the mortgage insurance premium and the GSE-backed 3 percent down payment loans are helping buyers to come with less money to the table.

But while mortgage credit availability is showing definite signs of easing, credit continues to still be far less available than it was during the housing boom days, according to MBA.

Source: "MBA: It Keeps Getting Easier to Get a Mortgage," HousingWire (May 12, 2015) and "REALTORS® Confidence Index," National Association of REALTORS® (April 2015)

NAR Board Approves Nationwide Listing Data Entry System

DAILY REAL ESTATE NEWS | MONDAY, MAY 18, 2015

The NAR Board of Directors has voted to approve a partnership to create an online system for all listing data posted by real estate brokerages, creating a single back-end entry point for distributing listings to MLSs, brokerage websites, Realtor.com® and other sites chosen by the broker.

The arrangement will bring together NAR and its wholly owned REALTORS Property Resource® (RPR) subsidiary with UpStream RE, LLC, a company formed by a coalition of brokerages, networks and national franchises. The organizations will work together to develop a system based on the RPR® Advanced Multi-list Platform (AMP™) that will allow brokerages to use one application to input data for multiple platforms, including Realtor.com, local MLSs and broker websites.

To learn more about the new data entry system, watch this video on REALTOR.org.

The initiative, approved by the Board on May 16 at the 2015 REALTORS® Legislative Meetings and Trade Expo in Washington, will be funded using NAR operating reserves.

Speaking before the Board voted, RPR CEO Dale Ross said the company has been successful in its mission of providing property information to REALTORS® on the web and via a popular mobile app and needs to act resolutely to keep pace as technology evolves. "The train has left the station," he said, referring to the real estate industry’s desire to develop a unified data-entry tool. "Technology moves fast."

NAR CEO Dale Stinton added that the partnership is a key strategic move for NAR and reflects the organization's tradition of making forward-looking investments in the real estate industry.

In other action, the Board of Directors:

• Approved funds to help two Texas real estate companies fight a patent troll's effort to extract licensing fees from them for their use of certain search technology on their websites. NAR is part of United for Patent Reform, a broad industry coalition formed to push for changes in patent law that would protect end users of technology from abusive lawsuits.
• Voted to support efforts by two state REALTOR® associations to advocate for ballot measures to prevent the possible future imposition of sales taxes on real estate transactions.
• Adopted a Commitment to Excellence, which encourages REALTORS® to strive for excellence in a number of competencies, including the NAR Code of Ethics and understanding real estate the laws and regulations. The Commitment to Excellence also extends to the way REALTORS® interact with one another and with consumers, and to the need to stay current on industry developments.
• Adopted a plan to support lending, counseling and other programs intended to help so-called "boomerang buyers" reenter the home buying market with confidence and the resources they need to succeed. Boomerang buyers are households that lost their home during the Great Recession and are now considering entering the market again.
• Created a program to recognize associations doing an exemplary job using resources from NAR's housing opportunity, smart growth, and diversity programs. The new Community Outreach Awards will be presented every other year.